LEUNG YEE VS STRONG MACHINERY

In 1913, Compania Agricola Filipina (CAF) was indebted to two personalities: Leung Yee and Frank L.
Strong Machinery Co. CAF purchased some rice cleaning machines from Strong Machinery. CAF installed
the machines in a building. As security for the purchase price, CAF executed a chattel mortgage on the
rice cleaning machines including the building where the machines were installed. CAF failed to pay Strong
Machinery, hence the latter foreclosed the mortgage the same was registered in the chattel mortgage
registry.
CAF also sold the land (where the building was standing) to Strong Machinery. Strong Machinery took
possession of the building and the land.
On the other hand, Yee, another creditor of CAF who engaged in the construction of the building, being
the highest bidder in an auction conducted by the sheriff, purchased the same building where the
machines were installed. Apparently CAF also executed a chattel mortgage in favor Yee. Yee registered
the sale in the registry of land. Yee was however aware that prior to his buying, the property has been sold
in favor of Strong Machinery evidence is the chattel mortgage already registered by Strong Machinery
(constructive notice).
ISSUE: Who is the owner of the building?
HELD: The SC ruled that Strong Machinery has a better right to the contested property. Yee cannot be
regarded as a buyer in good faith as he was already aware of the fact that there was a prior sale of the
same property to Strong Machinery.
The SC also noted that the Chattel Mortgage Law expressly contemplates provisions for chattel
mortgages which only deal with personal properties. The fact that the parties dealt the building as if its a
personal property does not change the nature of the thing. It is still a real property. Its inscription in the
Chattel Mortgage registry does not modify its inscription the registry of real property.

BH BERKENKOTTER VS CU UNJIENG
BH Berkenkotter vs Cu Unjieng

61 Phil 663Facts:
The Mabalacat Sugar Co., Inc., owner of the sugar central situated in Mabalacat, Pampanga,
obtained from Cu Unjieng e Hijos, a loan secured by a first mortgage constituted on two parcels
and land "with all its buildings, improvements, sugar-cane mill, steel railway, telephone line,
apparatus, utensils and whatever forms part or is necessary complement of said sugar-cane mill,
steel railway, telephone line, now existing or that may in the future exist is said lots.
Shortly after said mortgage had been constituted, the Mabalacat Sugar Co., Inc., decided to
increase the capacity of its sugar central by buying additional machinery and equipment, so that
instead of milling 150 tons daily, it could produce 250. The estimated cost of said additional
machinery and equipment was approximately P100,000. In order to carry out this plan, B.A.
Green, president of said corporation, proposed to the plaintiff, B.H. Berkenkotter, to advance the
necessary amount for the purchase of said machinery and equipment. Promising to reimburse
him as soon as he could obtain an additional loan from the mortgagees,
The president of the Mabalacat Sugar Co., Inc., applied to Cu Unjieng e Hijos for an additional
loan of P75,000 offering as security the additional machinery and equipment acquired by said
B.A. Green and installed in the sugar central after the execution of the original mortgage deed,
on April 27, 1927, together with whatever additional equipment acquired with said loan. B.A.
Green failed to obtain said loan.
Issues:
Whether or not, the lower court erred in declaring that the additional machinery and equipment
as improvement can be permanently attached to a mortgage of the sugar central.
Held:
That the installation of a machinery and equipment in a mortgaged sugar central, in lieu of
another of less capacity, for the purpose of carrying out the industrial functions of the latter and
increasing production, constitutes a permanent improvement on said sugar central and subjects
said machinery and equipment to the mortgage constituted thereon.
That the fact that the purchaser of the new machinery and equipment has bound himself to the
person supplying him the purchase money to hold them as security for the payment of the
latter's credit, and to refrain from mortgaging or otherwise encumbering them does not alter the
permanent character of the incorporation of said machinery and equipment with the central;
That the sale of the machinery and equipment in question by the purchaser who was supplied
the purchase money, as a loan, to the person who supplied the money, after the incorporation
thereof with the mortgaged sugar central, does not vest the creditor with ownership of said
machinery and equipment but simply with the right of redemption.
Wherefore, finding no error in the appealed judgment, it is affirmed in all its parts, with costs to
the appellant. So ordered.

SIBAL VS VALDEZ
FACTS:
Vitaliano Mamawal, Deputy sheriff of the Province of Tarlac, by virtue of a writ of execution issued
by the CFI of Pampanga, attached several properties of Leon Sibal including a sugar cane planted
by the latter on seven parcels of land. Mamawal then sold the aforementioned properties at a
public auction to Emiliano Valdez.
Within one year from the date of attachment and sale, Sibal offered to redeem the sugar cane
and tendered to Valdez the amount sufficient to cover the price paid by the latter, the interest
thereon and any assessments or taxes which he may have paid thereon after the purchase, and
the interest corresponding thereto. Valdez refused to accept the money and to return the sugar
cane on the ground that the sugar cane in question had the nature of personal property and was
not, hence, subject to redemption
Sibal prayed in court that a writ of preliminary injunction be issued against Valdez (1) from
distributing the lands; (2) from taking possession of, or harvesting the sugar cane; and (3) from
taking possession, or harvesting the palay in said parcels of land. Plaintiff also prayed that a
judgment be rendered in his favor and against the defendants ordering them to consent to the
redemption of the sugar cane.
Lower court issued the preliminary injunction prayed for. By way of counterclaim Valdez, alleged
that because of the preliminary injunction he was unable to gather the sugar cane, sugar-cane
shoots and palay in said parcels of land, representing loss and damages to him. Lower Court
rendered a judgment against the plaintiff and in favor of the defendants, holding that the sugar
cane in question was a personal property and, as such, was not subject to redemption. Plaintiff
appealed.
ISSUE:
WON the sugar cane is classified as a personal property.
HELD:
Generally, sugar cane falls under the classification of ungathered products mentioned in par.3
of Art. 334 of the CC: Trees, plants, and ungathered products, while they are annexed to the
land or form an integral part of any immovable property." However, this article has received in
recent years an interpretation by the Tribunal Supremo de Espaa, which holds that, under
certain conditions, growing crops may be considered as personal property.
In some cases "standing crops" may be considered and dealt with as personal property. In the
case of Lumber Co. vs. Sheriff and Tax Collector (106 La., 418) the Supreme Court said: "True, by
article 465 of the Civil Code it is provided that 'standing crops and the fruits of trees not gathered
and trees before they are cut down . . . are considered as part of the land to which they are
attached, but
the immovability provided for is only one in abstracto and without reference to rights on or to the
crop acquired by others than the owners of the property to which the crop is attached. . . . The
existence of a right on the growing crop is a mobilization by anticipation, a gathering as it were
in advance, rendering the crop movable quoad the right acquired therein. Our jurisprudence
recognizes the possible mobilization of the growing crop."

For the purpose of attachment and execution, and for the purposes of the Chattel Mortgage Law,
"ungathered products" have the nature of personal property.
In view of the foregoing, the judgment appealed from is hereby modified. The plaintiff and his sureties Cenon de la
Cruz, Juan Sangalang and Marcos Sibal are hereby ordered to pay to the defendant Valdez